Nobel-prize winning economist Joseph Stiglitz describes austerity as a suicide pact; a deal between the powerful business elite and government to reduce public spending. That leads to a slowdown in the economy which leads to a “vicious cycle of spending cuts and slumping growth.”
Dinyar Godrej elaborates in the New Internationalist magazine: “Austerity is being used as a tool for ever-increasing privatization, either with the collusion with moneyed-elite in government (as in Britain), or by the imposition of it on crisis-hit countries. . .”
Canada was on that path until the election of a new Liberal government. The intention of the Harper government was to reduce the size of government and reduce taxes; code words for reducing the effectiveness of democracy by starving government of cash.
The politics of austerity hit home in what I like to call “kitchen table politics” where some imagined family sits around the table and has frank discussions about their finances. Former Prime Minister Harper liked to play these politics. In a desperate bid to show the cost of Liberal promises during the last election, he turned to game-show tactics. Harper, sleeves rolled up, shared the stage with a family. Each took their turn peeling bills from a stack of cash and laying them on the table as a comical “ka-ching!” sound effect filled the room supposedly illustrating the cost of government spending.
Bad theatre aside, kitchen table politics ring true because voters confuse the government finances with their own. If families must tighten their belts then so should governments. In that light, Canada’s spending spree seems to defy logic: the Liberal government has promised to spend billions just when our economy is going through tough times.
When times are tough, so goes the rhetoric, hard choices have to be made. Austerity is the bitter pill that we all must to swallow to return the economy to health. Business confidence will only be restored when governments tighten their belts. Tax breaks for corporations will provide an incentive to invest more and create jobs.
The austerity of kitchen table economics seems to make sense. “The reason is clear,” says Dinyar Godrej, “In a depressed economy with increased job insecurity and worsening welfare provision, people want to hang on to their savings and not spend, prolonging the stagnation.”
Of course, it would be foolish not to manage spending when you lose your job. But austerity acts like a dark cloud hanging not over just the unemployed but everyone. Reduced spending perpetuates the downward cycle. Families need reasons to feel confident about the future.
Governments can create that confidence. Blind faith in corporations to stimulate the economy got us into this mess in the first place. Take Harper’s plan to make Canada an “energy superpower” as an example. It was a colossal mistake on two fronts. Emphasis on the exportation of our resources was at the expense of our manufacturing sector. His emphasis on small government left us with an infrastructure deficit.
Canada faces tough times but austerity would have made it worse. Government jobs carry the economy when the private sector can’t.
Eye View 